Corporate Governance and China’s H-Share Market
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Corporate Governance and China’s H-Share Market

Alice de Jonge

Using detailed case studies of the first nine mainland Chinese companies to be listed on the Hong Kong stock exchange, this book examines the evolution of corporate governance law and culture in China’s H-share market. A story emerges not of tensions between ideas of corporate governance from two different legal systems – Hong Kong vs mainland Chinese – nor about legal convergence as China adopts concepts from Anglo-American jurisdictions. Rather, it is a story of individual firms being pragmatic in mediating the different agendas of state-agencies that own or control them.
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Chapter 4: Internal Governance Structures Within the H-Share Firm: Solving Agency Problems in a Cross-Border Environment

Alice de Jonge


4. Internal governance structures within the H-share firm: solving agency problems in a cross-border environment I INTRODUCTION: THE H-SHARE COMPANY AND INSIDER CONTROL A recent study by the World Bank defines Corporate Governance as ‘the set of mechanisms available to shareholders for influencing managers to maximize the value of shareholder’s stock and to fixed claimants such as banks and employees for controlling the agency costs of equity’.1 The OECD’s revised Principles of Corporate Governance defines it as follows: a set of relationships between a company’s management, its board, its shareholders and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined.2 Both of these definitions imply and accept the ‘principal–agent’ model of the corporation which has dominated much of western corporate scholarship over the past century or more.3 This model, however, is one which has increasingly come under pressure in recent years. The first arena of questioning has been by scholars who have examined the experience of ‘transplanting’ western corporate law concepts into an alien environment – Vietnam under Doi Moi,4 for example, or China under Deng Xiaoping.5 In the case of China-focused scholars, many have concluded that, despite the undoubtedly western origin of much of modern Chinese corporations law, the modern Chinese listed firm remains a far cry from the western idea of the corporation as a ‘nexus’ of contracts between independent parties at arm’s...

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